shorts in the silver market?? this is new to me. I didnt know anyone was shorting silver, especially after a very long term base at the $5-$6 price level.
if there are shorts, they must be buying now and that will only propel the market higher still.
I got a PM asking how much higher silver will go? I see overhead resistance at $13 and that leaves the market plenty of upside potential. I don't expect a short surge, but rather a continuation of the modest gains. 10-25 cents a week will be nice.
once again: any changes in junk silver availability at local coin shops? cheers, alan mendelson
ps still updating my website articles on silver/gold bull market
Very interesting article, especially how the total short position (500 million ounces) is greater than the world's annual production.
<< <i>if there are shorts, they must be buying now and that will only propel the market higher still. >>
No, they are selling. Shorts sell now, buy later (if they think prices will fall). Here's what they can do:
1) Continue to sell (that is, buy shorts) in hopes that more and more selling will drive the price back down to a level where they can then buy (cover their shorts) without increasing the price of silver substantially. Remember, the higher the price gets, the more profitable shorting is, IF they can be CERTAIN that ultimately they can drive the price far enough down so they can cover their shorts.
2) Stop selling and increasing their downside exposure. Wait and hope that when their shorts come due the price will have declined.
3) Cover their shorts now, cutting their losses. That means BUYING 500 million ounces of silver on the open market. If this happened, the result would be unbelievable.
If and when they stop shorting, that will indicate they believe silver fundamentals are so strong that there is no way they can cover their shorts before the contracts run out. However, if they think the price will drop again, they can just hold their position and wait it out. If they see no end in sight and decide to cut their losses and cover their shorts, or if COMEX forced them to cover their shorts (which will NEVER happen--COMEX is in on it too), that would indicate a market quite literally out of control. Silver would skyrocket then settle back into a price dictated by long-term supply and demand.
I heard they were making a French version of Medal of Honor. I wonder how many hotkeys it'll have for "surrender."
How high anything can go is always an interesting question. Limits are usually much higher than most would consider possible. Total world wealth is probably in the range of a quadrillion dollars depending on how it's counted. If this were expressed in terms of only silver it would imply a price of $500,000 per ounce (80X that if you accept the more conservative estimate of the amount of silver in the world). Obviously having silver the only thing of recognized value would require the same sort of madness that pushes tulip bulbs to crazy heights or tech stocks paying no dividends to the moon, but this would put an upper limit on it. Likely silver prices will never exceed gold's but if you compute the value of a miles worth of a super conducting wire with oil at $37 / barrel it alone could make silver extremely valuable. Most likely when silver fin- ally does break out it will have great difficulty getting through the $14/ OZt resistence level and will then spend years getting through the next resistence at around $23. The $10 resistence would likely crumble if the shorts start getting covered, otherwise it could require a great deal of time also.
Ted Butler is the last word in the silver market. We will not see a repeat of the late 1970s. As Twain said, history does not repeat, it echoes.
i'll admit my naivete concerning all this talk about shorts. Geez, all i can think is, in the end, somebody will be losin' 'em!!
about the pasted comment above, i think it errs in the assumption that the market and all the forces working on that end of things are wiser due to the Hunt Brothers and won't let that type of thing happen again. what it fails to account for is that those at the reigns, Mssrs. Buffet, Gates and anyone else, are also a bit wiser and better able to manipulate things in their favor. from all prior discussion about the 1980 crash, our Uncle effectively cheated at the game to stop the Brothers. while i'm sure He'd like nothing more than to hand Bill Gates........his shorts, i wonder if he'll be able to??
In 1980 the cartel buying silver were acting virtually unilaterally. There was probably a net selling by most silver owners. At the current time there are several major buyers and millions of smaller ones. Of perhaps more import it has fallen very much out of favor to protect one's portfolio by put- ting assets into silver and gold. This means the general public has no silver and are likely to start buying if the price shoots up over $10. This additional pressure could cause a severe disruption to supplies and markets. While the government could tweek the system to stop the Hunts monopoly, it is a much more difficult proposition to disrupt a grass roots move.
Cladking, the question of "how high" is a very good one. I'm right now asking myself: if someone were to go out tomorrow and buy 500 MILLION OUNCES of silver over a one-month period of time, how would that affect silver prices? That's what will happen when they finally cover their shorts. I'm thinking IF silver rises so high that they cover their shorts, the resistance will happen in the $23 range. Perhaps $13 is when they will finally admit they have a losing game and decide to go ahead and cut their losses.
Excellent point about the many vs. few investors. Remember also, in 1980 there were substantially more silver coins in circulation. People could conceivably just look through their pocket change, sell it, and make some money, thus introducing more supply. Today, that MAJOR source of recyclable supply is no longer with us. The argument is that when silver gets expensive enough, people will sell silver to push it down. The problem, as you mentioned, is that most people don't own any silver. The second problem is that the silver coin supply is far more limited than it was almost 25 years ago.
I heard they were making a French version of Medal of Honor. I wonder how many hotkeys it'll have for "surrender."
fishcooker, I don't doubt that SOME day the price will finally break out. Whether or not today is the day remains to be seen. Several times in the last 25 years silver went up, peaked, and came back down. We'll see whether or not this is "the big one." If I wasn't a poor college kid, maybe I would be "double or nothing"
I heard they were making a French version of Medal of Honor. I wonder how many hotkeys it'll have for "surrender."
That's a neat article and I enjoyed it. But I would submit that another option was not presented - the Government could do a "Do Over" so that the big boys are prevented from losing.
For example, search "Long Term Capital Management".................
<< <i>That's a neat article and I enjoyed it. But I would submit that another option was not presented - the Government could do a "Do Over" so that the big boys are prevented from losing. >>
True. Then the question is whether or not a) the regulators are willing to be so BLATANTLY biased, b) whether the markets would redo the whole thing, and c) what would happen to the integrity of ALL commodities trading?
Has anyone found a writer that has a cogent argument as to why silver will NOT go up? I'd be very much interested in seeing how they get around the arguments presented by the bulls. I'm inclined to agree with the silver bulls, but I'm wary about formulating my own opinion before hearing both sides of the matter--if only I knew where to look for the "other" side.
I heard they were making a French version of Medal of Honor. I wonder how many hotkeys it'll have for "surrender."
ddink, let me give you the potential "other side" that could kill the silver bull: higher interest rates.
if rates rise substantially, the cost of financing silver will become too high... even silver shorts would become too expensive because short sales are also financed (you borrow the silver from your broker to sell it and pay interest on the loan of the silver).
high interest rates would also draw money to instruments that pay interest and bullion doesnt.
high interest rates would also dampen the economic demand for silver and other commodities.
high interest rates -- that's the matador to kill the silver bull.
silver coin was not even close to circulating in 1980....or 1970 for that matter. While one could find a random silver coin in change in 1980 (maybe 1 out of 1000 - 10,000) you would not have been able to make a silver stake out of it. Your local coin dealer was the only real local source for silver.
The manipulation in the silver market may be multiples of what goes on in the gold market. Neither of these is even close to a free market. One could say the same thing about stocks too but to a far lesser extent. As the manipulations and hedges unwind, freer markets will result....prices go up.
Roadrunner, I understand that silver coins weren't circulating in 1980, but what I meant to say is that there were a few hoards of them that could be tapped to drive prices down somewhat. Just pulling a number out of thin air, let's say 10 million ounces of silver coins were melted in 1980. That's 10 million fewer ounces that could come back to "bite us" if silver prices rise really high again. Manipulation DOES happen in every other market too, but the shorts on gold could be covered by 6 months of world gold production. Silver is the only commodity whose shorts could not be covered even by an entire year of production.
I heard they were making a French version of Medal of Honor. I wonder how many hotkeys it'll have for "surrender."
The great silver melt of 1979-80 removed the "threat" of silver stockpiles in the hands of consumers ruining the current run-up in prices.
The only silver in the hands of the public now is also in slabs, or in jewelry and grandma's candlesticks that avoided the last melt. I doubt it will be melted in this runup.
And world wide, there is a shortage of silver.
this is a bull run -- period. And today's action was more than expected. I will have to raise my estimates.
I believe that the public in 1980 had more stockpiles of silver coins than today. Although today we have Silver Eagles, back then folks like my parents had stashes of mercuries and silver quarters.
I also agree "this is a bull - period." It would not be uncommon for the price to go exponential - see the SOX index and internet stocks of 1999-2000. I had a neat little small cap fund go up 24% in 18 days back then (or was it 18% in 24 days?) But we all know things that go up exponentially usually come down even faster exponentially, so let's all have fun and be prepared for whatever comes our way....
Your statement: if rates rise substantially, the cost of financing silver will become too high... even silver shorts would become too expensive because short sales are also financed (you borrow the silver from your broker to sell it and pay interest on the loan of the silver). Seems logical but notaccording to this (Note they say shorts DO NOT borrow the silver stock but are short PAPER
I read the Butler article and frankly it is an extreme view. but note that he says there is a "balance" in the contracts, even if the contracts dont represent the actual metal.
still the practice of short sales is a balanced transaction.
when you make a short sale, someone else is buying what you sell. you must borrow the item you are selling short, so that the buyer can actually buy something. that "something" is the borrowed item. the person lending the borrowed item demands interest for the time you are borrowing it.
if short sellers were selling something out of thin air, there would not be buyers. (would you buy silver that does not exist?)
the markets are always in balance. no one is buying things out of thin air or selling them out of thin air.
the only "gap" in the market is that the supply of silver is not keeping up with demand.
<< <i>if short sellers were selling something out of thin air, there would not be buyers. (would you buy silver that does not exist?) >>
Not so Alan--in fact that is *exactly* what is happening. Would I buy silver that doesn't exist? No, but look at all the people who hold COMEX receipts whereby COMEX claims that you own a certain amount of silver. Yet YOU don't own it, you simply hope they do. When you sell silver short, someone buys a contract (COMEX receipt, etc.) for delivery, but many do not take actual delivery of it. Thus you *do* have tons and tons of "paper silver" out there. One of these days the shorts will have to buy back all that paper...then watch out!
I heard they were making a French version of Medal of Honor. I wonder how many hotkeys it'll have for "surrender."
Keep in mind too that while these contracts are "balanced" they still don't represent real metal. Those who are long on futures are bulls and expect to make a profit if the price moves up. The sellers though could default on payment if they go bankrupt. Many of these bulls could get into the market to buy physical metal which alone could cause dramatic moves since they are already long more than a year's production.
While there is no gaurantee that silver is going to go up at the current time, it does seem that it will eventually break out and surprise most observers.
ddink is correct and one estimate I've read is that there is only enough silver to cover around 1/3 of the existing contracts. Imagine the number of people who will be left empty handed. Lawsuits will be a flying! My advice is always take physical possession.
Excellent discussion gentlemen, I would like to add I happen to physically own only 1500 oz's. of the millions currentlly on the planet. (Does that mean I have more children than I thought?) lol I should add as the shorts begin to sweat, due to the recent "breakout", resistance plateaus can be shattered as they "cover" their losses. I would also seem fair to say after a hefty breakout, the price would/could retrace up to 60% of the the highs. Ultimately, the (long) demand should warrant the general public to buy more, whom currently are not invested, causing additional spikes. The end result (future pricing) is not in my forte. It wouldn't hurt my feelings if the price was $75.00/oz.
Comments
if there are shorts, they must be buying now and that will only propel the market higher still.
I got a PM asking how much higher silver will go? I see overhead resistance at $13 and that leaves the market plenty of upside potential. I don't expect a short surge, but rather a continuation of the modest gains. 10-25 cents a week will be nice.
once again: any changes in junk silver availability at local coin shops? cheers, alan mendelson
ps still updating my website articles on silver/gold bull market
www.AlanBestBuys.com
www.VegasBestBuys.com
<< <i>if there are shorts, they must be buying now and that will only propel the market higher still. >>
No, they are selling. Shorts sell now, buy later (if they think prices will fall). Here's what they can do:
1) Continue to sell (that is, buy shorts) in hopes that more and more selling will drive the price back down to a level where they can then buy (cover their shorts) without increasing the price of silver substantially. Remember, the higher the price gets, the more profitable shorting is, IF they can be CERTAIN that ultimately they can drive the price far enough down so they can cover their shorts.
2) Stop selling and increasing their downside exposure. Wait and hope that when their shorts come due the price will have declined.
3) Cover their shorts now, cutting their losses. That means BUYING 500 million ounces of silver on the open market. If this happened, the result would be unbelievable.
If and when they stop shorting, that will indicate they believe silver fundamentals are so strong that there is no way they can cover their shorts before the contracts run out. However, if they think the price will drop again, they can just hold their position and wait it out. If they see no end in sight and decide to cut their losses and cover their shorts, or if COMEX forced them to cover their shorts (which will NEVER happen--COMEX is in on it too), that would indicate a market quite literally out of control. Silver would skyrocket then settle back into a price dictated by long-term supply and demand.
than most would consider possible. Total world wealth is probably in the range of a quadrillion
dollars depending on how it's counted. If this were expressed in terms of only silver it would
imply a price of $500,000 per ounce (80X that if you accept the more conservative estimate of
the amount of silver in the world). Obviously having silver the only thing of recognized value
would require the same sort of madness that pushes tulip bulbs to crazy heights or tech stocks
paying no dividends to the moon, but this would put an upper limit on it. Likely silver prices will
never exceed gold's but if you compute the value of a miles worth of a super conducting wire
with oil at $37 / barrel it alone could make silver extremely valuable. Most likely when silver fin-
ally does break out it will have great difficulty getting through the $14/ OZt resistence level and
will then spend years getting through the next resistence at around $23. The $10 resistence
would likely crumble if the shorts start getting covered, otherwise it could require a great deal of
time also.
i'll admit my naivete concerning all this talk about shorts. Geez, all i can think is, in the end, somebody will be losin' 'em!!
about the pasted comment above, i think it errs in the assumption that the market and all the forces working on that end of things are wiser due to the Hunt Brothers and won't let that type of thing happen again. what it fails to account for is that those at the reigns, Mssrs. Buffet, Gates and anyone else, are also a bit wiser and better able to manipulate things in their favor. from all prior discussion about the 1980 crash, our Uncle effectively cheated at the game to stop the Brothers. while i'm sure He'd like nothing more than to hand Bill Gates........his shorts, i wonder if he'll be able to??
al h.
by most silver owners. At the current time there are several major buyers and millions of smaller
ones. Of perhaps more import it has fallen very much out of favor to protect one's portfolio by put-
ting assets into silver and gold. This means the general public has no silver and are likely to start
buying if the price shoots up over $10. This additional pressure could cause a severe disruption to
supplies and markets. While the government could tweek the system to stop the Hunts monopoly,
it is a much more difficult proposition to disrupt a grass roots move.
Excellent point about the many vs. few investors. Remember also, in 1980 there were substantially more silver coins in circulation. People could conceivably just look through their pocket change, sell it, and make some money, thus introducing more supply. Today, that MAJOR source of recyclable supply is no longer with us. The argument is that when silver gets expensive enough, people will sell silver to push it down. The problem, as you mentioned, is that most people don't own any silver. The second problem is that the silver coin supply is far more limited than it was almost 25 years ago.
If you know all these future prices, why aren't you "double or nothin" today?
Oh yee of little faith?
That's a neat article and I enjoyed it. But I would submit that another option was not presented - the Government could do a "Do Over" so that the big boys are prevented from losing.
For example, search "Long Term Capital Management".................
<< <i>That's a neat article and I enjoyed it. But I would submit that another option was not presented - the Government could do a "Do Over" so that the big boys are prevented from losing. >>
True. Then the question is whether or not a) the regulators are willing to be so BLATANTLY biased, b) whether the markets would redo the whole thing, and c) what would happen to the integrity of ALL commodities trading?
Has anyone found a writer that has a cogent argument as to why silver will NOT go up? I'd be very much interested in seeing how they get around the arguments presented by the bulls. I'm inclined to agree with the silver bulls, but I'm wary about formulating my own opinion before hearing both sides of the matter--if only I knew where to look for the "other" side.
if rates rise substantially, the cost of financing silver will become too high... even silver shorts would become too expensive because short sales are also financed (you borrow the silver from your broker to sell it and pay interest on the loan of the silver).
high interest rates would also draw money to instruments that pay interest and bullion doesnt.
high interest rates would also dampen the economic demand for silver and other commodities.
high interest rates -- that's the matador to kill the silver bull.
(I wax poetic)
cheers, alan mendelson
www.AlanBestBuys.com
www.VegasBestBuys.com
silver coin was not even close to circulating in 1980....or 1970 for that matter. While one could find a random silver coin in change in 1980 (maybe 1 out of 1000 - 10,000) you would not have been able to make a silver stake out of it. Your local coin dealer was the only real local source for silver.
The manipulation in the silver market may be multiples of what goes on in the gold market. Neither of these is even close to a free market. One could say the same thing about stocks too but to a far lesser extent. As the manipulations and hedges unwind, freer markets will result....prices go up.
roadrunner
The only silver in the hands of the public now is also in slabs, or in jewelry and grandma's candlesticks that avoided the last melt. I doubt it will be melted in this runup.
And world wide, there is a shortage of silver.
this is a bull run -- period. And today's action was more than expected. I will have to raise my estimates.
cheers, alan mendelson
www.AlanBestBuys.com
www.VegasBestBuys.com
www.AlanBestBuys.com
www.VegasBestBuys.com
I believe that the public in 1980 had more stockpiles of silver coins than today. Although today we have Silver Eagles, back then folks like my parents had stashes of mercuries and silver quarters.
I also agree "this is a bull - period." It would not be uncommon for the price to go exponential - see the SOX index and internet stocks of 1999-2000. I had a neat little small cap fund go up 24% in 18 days back then (or was it 18% in 24 days?) But we all know things that go up exponentially usually come down even faster exponentially, so let's all have fun and be prepared for whatever comes our way....
In the end I intend to go fishin' for free.
Your statement: if rates rise substantially, the cost of financing silver will become too high... even silver shorts would become too expensive because short sales are also financed (you borrow the silver from your broker to sell it and pay interest on the loan of the silver).
Seems logical but notaccording to this (Note they say shorts DO NOT borrow the silver stock but are short PAPER
http://www.kitco.com/ind/Hornig/apr012004.html
Jim
still the practice of short sales is a balanced transaction.
when you make a short sale, someone else is buying what you sell. you must borrow the item you are selling short, so that the buyer can actually buy something. that "something" is the borrowed item. the person lending the borrowed item demands interest for the time you are borrowing it.
if short sellers were selling something out of thin air, there would not be buyers. (would you buy silver that does not exist?)
the markets are always in balance. no one is buying things out of thin air or selling them out of thin air.
the only "gap" in the market is that the supply of silver is not keeping up with demand.
cheers, alan mendelson
www.AlanBestBuys.com
www.VegasBestBuys.com
<< <i>if short sellers were selling something out of thin air, there would not be buyers. (would you buy silver that does not exist?) >>
Not so Alan--in fact that is *exactly* what is happening. Would I buy silver that doesn't exist? No, but look at all the people who hold COMEX receipts whereby COMEX claims that you own a certain amount of silver. Yet YOU don't own it, you simply hope they do. When you sell silver short, someone buys a contract (COMEX receipt, etc.) for delivery, but many do not take actual delivery of it. Thus you *do* have tons and tons of "paper silver" out there. One of these days the shorts will have to buy back all that paper...then watch out!
Those who are long on futures are bulls and expect to make a profit if the price moves up. The
sellers though could default on payment if they go bankrupt. Many of these bulls could get into
the market to buy physical metal which alone could cause dramatic moves since they are already
long more than a year's production.
While there is no gaurantee that silver is going to go up at the current time, it does seem that it
will eventually break out and surprise most observers.
roadrunner